The United Kingdom-Korea-Japan free trade agreement with the reduction in tariffs and non-tariff measures on trade and welfare

Abstract

This study examined the effects of the UK–Korea–Japan free trade agreement (FTA) with the removal of import tariffs and non-tariff measures (NTMs) on real GDP, exports, imports, and welfare using a computable general equilibrium model. The simulation results showed that just using tariff elimination without NTMs leads to underestimation of the effects of the FTA. The trilateral UK–Korea–Japan FTA will be more beneficial than the bilateral UK–Korea and UK–Japan FTAs and will increase GDPs and exports in the UK, Korea, and Japan more over time. In contrast, China, the USA, and the EU will decrease their exports to the UK, Korea, and Japan. Although both the UK and Korea will see large trade creation effects on imports from Japan, China, the USA, and the EU will decrease their imports. The UK–Korea–Japan FTA will also bring much larger welfare gains to the UK, Korea, and Japan than the two bilateral FTAs. Thus, the UK–Korea–Japan FTA will provide more economic gains over periods than the current UK–Korea and UK–Japan FTAs.